Managing Accessorial Charges – Part 2

Once you gather the necessary data outlined in the previous blog (http://www.dantranscon.com/index.php/blog?view=entry&id=229 ), it is time to take action. Here is a set of steps to follow to save money on accessorial charges.

Set up a cross-functional team

As you will realize when you review your research notes, it will often take a number of parties (sales, production, and warehouse management) plus the customer in many cases and your carriers to address how to reduce accessorial charges. Once you assemble your cross-functional team, have a meeting to share and discuss your findings and create cost saving targets, action plans, persons accountable and timelines.

Create a report to track success on a monthly basis. Share the report with key stakeholders and follow up with any stakeholder who does not fulfill his/her responsibilities.

Review primary and backup carriers to all destinations

Compare freight rates and accessorial charges from each carrier on each piece of business. Meet with all affected carriers and switch to those with more favorable terms and conditions or that are more flexible. Keep in mind that many accessorial charges are negotiable and in some cases, carriers will waive some of them to retain the business.

Audit carrier invoices to see if they are following through on their commitments. If you don’t have a backup carrier on every lane, find carriers that can do the work and check their rates and surcharges against the incumbents.

Make fixing fuel surcharges a top priority

The fuel surcharge, an accessorial charge, is usually the largest accessorial charge for most shippers. The good news is that it can be managed and negotiated. The bad news is that carriers are wise as to how to make additional money from this particular item. Here are a few tips.

Do your due diligence to see how the fuel surcharge formulas vary among your carriers on your various pieces of business. To get the full picture, make sure you add freight and fuel costs together to accurately compare “apples to apples.”

Check to see if your company is receiving a discount off the appropriate tariff (i.e. Freight Carriers Association of Canada) that is being employed. If you aren’t receiving a discount, ask for one.

Watch out for tricks that carriers play with fuel surcharges on unsuspecting shippers. If you are moving LTL freight, you should be paying the LTL fuel surcharge, not the truckload fuel surcharge rate. This can represent a difference of 10 to 15 percent. If you are shipping truckloads of regular dry van freight, you should be paying the dry van truckload fuel surcharge rate, not the heavy haul truckload fuel surcharge rate.

If your company moves truckloads of LTL freight with stops, you should be paying the truckload fuel surcharge on the total shipment weight, not LTL surcharges on each LTL order. If you don’t have expertise in freight rate pricing, get some help from a freight audit firm or other company that has this expertise. They can help you save significant sums of money.

Study your freight

Obtain shipment profile data on the weights, densities, order sizes, pallet configurations and frequency of shipments on each corridor. Know the density of your freight. Your company should be paying for the correct density (i.e. 15 pounds per cubic foot) or class (i.e. NMFSC) and not a penny more.

To improve density, look at packaging improvements. Carriers are not shy to scale and weigh your shipments and apply the corrected rate. In discussions with carriers, use shipping frequency data to mitigate accessorial charges on situations (i.e. apartment deliveries) that very rarely occur.

Do your homework on waiting times and late deliveries at destination

Waiting time charges are assessed at both customer and company owned warehouses. In addition, some big name companies are not shy to assess large fines for late deliveries. To mitigate these charges, you may need to work with or around your own sales people. There are a number of things to investigate.

Where does the carrier’s truck or your private fleet’s truck experience excess waiting time and why? Are there appointment deliveries? Are they necessary? Are they honored? Are there lumper fees or unloading charges? Are there any actions you can take to improve delivery performance? To resolve any problems, you need to have a clear understanding of what is going on at the other end.

Challenge any irregularities and speak with the parties involved to correct poor business practices. Don’t pay for late delivery fines if the carrier is responsible.

Speak to your carriers about what you can do better

Call in your carriers with whom your company has accessorial charge issues. Have a frank and open discussion with each one on what each party can change to make life easier for the other. Speak with your carriers about their experience in delivering to some of your customers. Contrast their views with what you hear from your consignees. If the views don’t reconcile with one another, set up a GoToMeeting to listen, learn and fix problems.

Summary

Accessorial charges arise most often from shipper operational and administrative processes that deviate from industry norms. With research, teamwork, a solid action plan and follow up, many of these charges can be reduced or eliminated.

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